Dubai’s new decree on real estate funds stretches investment possibilities

The recent media coverage surrounding Dubai’s new decree law on real estate funds is well warranted. Initially, only the high-level overview was available, which summarized the key features and incentives, ie, that certain real estate funds could now be regulated, and such funds would then be able to apply to be exempt from the soon to come into force corporate income tax regime in the UAE.

We delve deeper into the decree law (Dubai Decree No. 22/2022) and the benefits of such a development.

The decree is aimed at enhancing Dubai as a destination for real estate investment from all across the world. It covers all licensed real estate investment funds in Dubai (mainland and free zones inclusive, including those funds registered in the DIFC), and all properties in Dubai (mainland and free zones, except properties located in DIFC).

The President of the DIFC is granted the power to grant further privileges to funds registered and operating in the DIFC.

A register for real estate investment funds will be set up with and regularly audited by the Dubai Land Department for registration of eligible funds, and funds that are registered may avail themselves of the benefits/incentives under the decree.

Some of the eligibility criteria for funds are:

Transfers of shares/units in the fund by investors will not attract any fees relating to property transfer. Founders of the fund are allowed to contribute to the fund in kind, and contributions in the form property will attract a fee of Dh50,000 rather than the standard 4 per cent fee.

Arguably the most crucial development brought about by the decree is the ability for the funds to acquire rights in property located in areas previously restricted to local ownership (as approved by the Committee of Property Investment Funds). This greatly broadens the market for property investment in Dubai.

Funds considering entry into the market should seek legal advice as this is regime is in the early stages of its development, and applicants will likely require establishing a dialogue with the competent authorities to ensure a smooth and successful application process.